Business Law Midterm questions

Apple assigns the same contract rights to Enzo, and then to Sam. Sam immediately notifies the obligor of the assignment to him; Enzo never notifies the obligor. When Sam notified the obligor, he did not know about the earlier assignment to Enzo. Sam will have the better right under the:

"English rule."

________ is the actual or implied receipt and retention of that which is tendered or offered.

Acceptance

Adrienne contracted to convey real estate to Rich. However Adrienne died before the conveyance is completed. What is the status of the parties?

Adrienne's performance was impossible

Which of the following will not make an agreement illegal?

An agreement that is not timely ratified.

Which of the following offerors is free to revoke his offer?

An offeror that agreed to keep an offer open without consideration.

Which of the following describes a stipulation?

An offeror's right to determine the manner of acceptance

Which of the following is true of assignments?

Article 2 of the UCC deals with assignments of rights under a contract for the sale of goods.

Which of the following about mutual mistake of a basic assumption is true?

Assumptions about the identity, quality, or quantity of the subject matter of the contract are considered to be basic assumptions.

Why does Article 2 hold merchants to a higher standard than nonmerchants?

Because buyers tend to place more reliance on merchants

The _________ of contracts is court-made law that is in a constant state of evolution.

Common law

As discussed in the case in the text, Hicks v. Sparks, a person who is harmed by a mutual mistake cannot avoid that contract if he is considered to bear the risk of mistake. Which of the following statements is true?

Courts have the power to allocate risk of a mistake on the adversely affected person whenever it is reasonable under the circumstances to do so.

Which of the following statements about delegable duties is false?

Delegations are always enforceable, even if they violate public policy.

The statute of frauds was created in 1677 in which country?

England

A contract to commit a serious crime is a legal contract.

False

A famous journalist predicted the result of an NBA match between the LA Groves and LA Phantoms in favor of the Phantoms, based on the present form of Groves. Accordingly, Mark placed a huge bet on the Phantoms and lost heavily. This is an example of misrepresentation of a material fact of a contract.

False

A firm offer for the sale of goods requires consideration to be given in exchange for the offeror's promise to keep the offer open.

False

A minor can disaffirm agreements to support their children.

False

A minor has the right to recover any consideration, including goods transferred to third parties. This includes even good faith purchasers.

False

Any contract that is deemed illegal is also a criminal violation.

False

Offers that fail to provide a specific time for acceptance are invalid because they are deemed to be indefinite.

False

Once a party properly delegates a duty to the delegatee, that party is relieved of any obligation to perform the duty.

False

Parol evidence can be used to contradict the written terms of a partially integrated contract.

False

Pratt, an owner of an appliance store, has a garage sale at his home where he sells old furniture and books. He sells a set of books to his neighbor, Stacey. Pratt is considered a merchant under Article 2 of the UCC in selling the books to Stacey.

False

Ratification of a contract with a minor ahs to be expressly made only in written form.

False

Under the theory that alcohol and drug use should not be rewarded, today most courts say that contracts made by intoxicated people are perfectly binding, no matter how severe the intoxication is.

False

Gayle agrees to pay Pat $1,000 for painting her house "on condition that" Pat finish the job no later than October 1, 2016. Which of the following statements is false?

Gayle does not have a duty to pay the contract price.

Why is the contract for the insurance of a building not covered within the real estate provision of the statute of frauds?

It does not involve the transfer of interests in land.

Which of the following is a criticism of the traditional rule of restitution in the case of minors who have disaffirmed a contract?

It is harsh on innocent adults who have dealt fairly with minors.

When the consideration given in exchange for the collateral promise is something the guarantor seeks primarily for his own benefit rather than for the benefit of the primary debtor, the contract:

It is outside the statute of frauds.

Which of the following is used by the majority of courts when there is an acceptance that contains terms that are different from (not merely additional to) the terms of the offer?

Knock-Out Rule

A party cannot recover for losses that he could have avoided without undue risk, burden, or humiliation. This is an example of:

Mitigating damages

If a consumer is presented with a contract of adhesion with no opportunity to negotiate terms and signs the agreement without understanding what he is signing, has he consented to the terms?

NOT 'He has consented to all terms of the contract.'

Which of the following statements about "usage" is false when courts interpret contracts?

NOT 'If the court finds that a certain practice is a matter of common usage in the parties' trade, it will assume that the parties intended to include that practice in their agreement.'

Which of the following is not a reason why it is important for parties to memorialize their agreements in writing?

NOT 'Signing a writing communicates the seriousness of the occasion to the signer.'

Which of the following statements about The United Nations Convention on Contracts for the International Sale of Goods (CISG) and acceptance is false?

NOT 'Statements or other conduct by the offeree that shows assent is an acceptance.'

In the case in the text, Walters v. YMCA, what was the court's holding?

NOT 'The language of the exculpatory clause was appropriate under the circumstances and Walters could not recover.'

In general, contracts made by mentally impaired persons:

NOT 'are unconditionally void.'

A person rescinds a contract must:

NOT 'return everything that he received from the other party'

In The Industrial Development Board of the City of Montgomery v. Russell, the case in the text, the court held that:

NOT 'the City was not a party to the option agreements and therefore was not liable for breach of contract because IDB was not acting as the City's agent.'

Which of the following is not a required element to avoid a contract due to mutual mistake?

NOT 'the mistake has a material effect on the agreed-upon exchange.'

Helga owns an insurance business in Idaho. Her clients are all Idaho residents. She later sells her business to Carlos. As part of the deal, the contract contains a noncompete clause that prevents Helga from operating an insurance business anywhere in Idaho, Washington, or Oregon for a period of five years. Six months after this sale, Helga opens an insurance business in Oregon. If Carlos seeks to enforce the noncompete agreement against Helga, will he probably be successful?

No, because this agreement is not reasonable

Joe promises to give his brother Bill a $30,000 new car for $50. Which of the following best describes th $50?

Nominal consideration

Fun Foods fraudulently induces Holly to buy a household products franchise by grossly misstating the average revenues of its franchisees. She discovers the misrepresentation after she resold some products that she received but before she has paid Fun Foods for the products. Holly wants to cancel the franchise contract on the basis of fraud. What is the remedy available to her?

Quasi-contract

Which of the following, in the context of contracts, means to terminate the contract as to future transactions or to annul the contract from the beginning?

Rescind

Which of the following must a person prove to rescind a contract if the misrepresentation was innocent?

That the fact was material

Which of the following is true regarding the approach taken by the UCC toward the proper means of acceptance and the implications of using it or not using it?

The UCC does not change the traditional rule that, where the offer stipulates a certain means of acceptance, the offeree must use that means or there is no contract.

Which of the following statements about the vesting of a beneficiary's rights is false?

The exact time at which the beneficiary's rights vests is identical in every jurisdiction.

Which of the following is true of necessaries?

The liability for necessaries is quasi-contractual.

Which of the following characterizes emancipation?

There are no formal requirements for it.

April Roberts ordered one hundred 19-inch color television sets from Carl Soans and requested prompt shipment of the goods. Carl promptly shipped fifty 21-inch color television sets and fifty 19-inch color television sets without informing April that the shipment of nonconforming television sets was an accommodation. Which of the following is true?

There is an acceptance but Carl has breached the contract by shipping nonconforming television sets.

A minor's contract for necessaries makes the minor liable for the reasonable value of the necessaries furnished to him.

True

A signature is sufficient to form the basis of authenticity of a written contract.

True

A third-party beneficiary is a person who is not a party to a contract but who has the right to enforce it because the parties to the contract made the contract with the intent to benefit him or her.

True

Arthur and Brian have entered into a contract with an enforceable liquidated damages provision that states that Ben's recovery will be $10,000 in the event of Arthur's breach. Arthur breaches the contract. Ben loses $50,000 in consequential damages as a result. Ben's recovery is limited to $10,000.

True

Bob offers to sell his bike to Sue for $100, and promises to keep his offer open for five days. Sue thanks him and leaves. At this point, Bob still has the power to revoke his offer.

True

Mr. Blue and Mr. Green are in negotiations for a regular delivery of newspapers to Mr. Blue's business. Mr. Blue did not formally announce his acceptance to the offer. But when Mr. Green sent a shipment of newspapers as they agreed, Mr. Blue accepted the shipment and paid for them. According to the UCC, Mr. Blue and Mr. Green have an enforceable contract.

True

Mr. Green agrees to purchase a lawn mower from Ms. White for $300. The act of payment of $300 by Mr. Green is consideration for the act of passing ownership of the lawn mower from Ms. White to Mr. Green.

True

Mr. Green contracts to repair his roof with Mr. Brown. Prior to the work starting a tornado destroys Mr. Green's home. Mr. Brown fails to perform under the contract, but the court will not consider Mr. Brown to be in breach due to impossibility.

True

Mr. White contracts with Mr. Green for 100 black coffee mugs. Mr. White decides he needs the mugs faster than the time allotted in the contract and asks for a rush shipment. Mr. Green notifies Mr. White that he will ship 100 coffee mugs but that the only ones available are red. A court will find that the shipment of red mugs under the UCC is not a breach of the original agreement.

True

The CISG applies only to sales of goods and commercial parties.

True

The intention to accept an offer must be present intent to contract on the part of the offeree.

True

The term "parol evidence" means written or spoken statements that are not contained in the written contract.

True

Under the doctrine of unconscionability, courts would refuse to grant the equitable remedy of specific performance for breach of contract if the contract was oppressively unfair.

True

When a person asserts he lacked capacity as the basis for a claim or defense, it is his responsibility for alleging and proving it.

True

Debbie Jones and Bill Schneider exchanged standard order forms to formalize their contract for a batch of goods and realized that their standard forms do not agree on material terms. Under UCC section 2-207, when will there be a contract? Assume that Bill did not make his acceptance conditional on Debbie's assent to any additional or different terms.

When Bill's form is a definite and seasonable expression of acceptance.

In which of the following circumstances is a debt settlement a binding contract?

Where the amount of the debt is certain and undisputed.

James owns Great Expectations, a trendy restaurant in Manhattan. He enters into a contract with Mary, who makes and sells pastries. The contract states that Mary will "supply all of Great Expectation's needs" for pastries for the next year. Is this contract enforceable?

Yes, because this is a requirements contract.

Ward is attempting to introduce oral evidence in an action relating to a written contract between Ward and Weaver. Weaver has pleaded the parol evidence rule. Ward will be prohibited from introducing parol evidence if it relates to:

a change in the meaning of an unambiguous provision in the contract.

An uncertain future event, the occurrence of which is necessary for the existence of a contractual obligation is called:

a condition precedent

In the case in the text, Doe v. Roman Catholic Archdiocese of Indianapolis, the court held that:

a moral obligation to perform an agreement is not adequate consideration.

Morton Reeves, a building subcontractor, submitted a bid for construction of a portion of a high-rise office building. The bid contained material errors in computation. Lago Corp., the general contractor, accepted the bid with the knowledge of Reeves' errors. Reeves:

can avoid liability on the contract since Lago knew of his errors.

A newspaper advertisement made to the general public:

can be revoked by using a similar newspaper advertisement.

In Killian v. Ricchetti, the case in the text, the agreement between the parties is an example of a:

condition precedent

The appointment of another person to perform a duty under a contract is called a(n):

delegation.

A contract is _____ when each party's performance can be divided in two or more parts and each part is exchanged for some corresponding consideration from the other party.

divisible

The CISG:

does not have provisions to cover every contract problem that might occur.

Jim, the CEO of Maple, Inc., signed a few papers that Amanda, his secretary, presented to him. Unknown to Jim, Amanda had carefully slipped in a contract for the sale of Jim's home to her in the papers. If Amanda seeks to enforce the contract, Jim's best defense to have the contract declared void would be:

fraud in the execution

When the surrounding facts and circumstances indicate that an agreement has in fact been reached, a(n) ______ has been created.

implied contract

If Jack promises to unload landscaping rock from Harry's truck, the truck's arrival would be a(n) ________ of Jack's duty to unload the rock.

implied-in-fact condition

Daniel is a senior at State University. Brian, Daniel's father, is concerned about Daniel's study habits, given that Daniel spends most of his evenings at the campus pub instead of the library. Brian promises Daniel that he will send him on an expense-paid trip to Europe after his graduation if Daniel spends at least five evenings a week studying in the campus library for the remainder of his senior year. After returning home from his graduation, Daniel asks Brian about the European trip. Brian replies, "Your education was your reward. I don't owe you a trip to Europe." Brian is:

incorrect; Brian owes Danial a trip to Europe because Daniel's acts are consideration.

Toby, an Ohio real estate broker, misrepresented to Allen that he was licensed in Michigan under Michigan's statute regulating real estate brokers. Allen signed a standard form listing contract agreeing to pay Toby a 6% commission for selling Allen's home in Michigan. Toby sold Allen's home. Under the circumstances, Allen is:

not liable to Toby for any amount because Toby violated the Michigan licensing requirements.

A(n) ________ is a proposal by one person to another that is intended to create legal relations on acceptance by the person to whom it is made.

offer

The ________ has the power to bind the person who makes an offer simply by accepting the offer.

offeree

A reaffirmation promise has to be made prior to the date of the discharge and gives the debtor the right to revoke his promise within 30 days after it becomes enforceable. This is the requirement of:

promises to pay debts barred by statutes of limitations.

An ambiguous offer may be accepted in any manner that is ________ in light of the circumstances.

reasonable

Generally, statutes that require proof of character and skill and impose penalties for violation are considered to be ________ in nature.

regulatory

A promise for a charitable purpose will be enforced, despite the absence of consideration, when the promisee:

relied on the promised gift.

Janet goes to an electronics store to purchase design software. The software comes in a sealed package and when Janet opens it, she finds that the CD containing the program is sealed in an envelope that states, "By opening this envelope, you are accepting the terms of the license agreement that is contained in this packaging. If you do not want to accept the terms of the license, you can return this product." This method of contracting is referred to as:

shrinkwrap contracting.

Price signed a contract to sell Wyatt a parcel of land for $90,000. The entire sales price was payable at the closing. Price decided to keep the land. If Wyatt commences an action against Price, what relief is Wyatt most likely to receive?

specific performance

Ashley says to Ford, "I'd like to buy your house," and Ford responds, "You've got a deal." This exchange lacks ________.

specificity

In an employment contract, the noncompetition clause might be the only part of the contract:

that the parties put in writing

The primary distinction between an action based on innocent misrepresentation and an action based on common law fraud is that, in the former, a party need not allege and prove:

that the party making the misrepresentation had actual or constructive knowledge that it was false.

In the case in the text, Filer, Inc. v. Staples, Inc., the court held that Article 9 of the Uniform Commercial Code was inapplicable to the assignment because:

the assignment of accounts receivable was not for a security interest.

In The United States Life Insurance Company in the City of New York v. Wilson, the case in the text, the court held that the check was dispatched within the meaning of the mailbox rule when:

the bank sent the insurance company the check

As mentioned in the case in the text, Steinberg v. U.S., in deciding whether consideration to form a contract exists, a court must determine whether:

the benefit was bargained for.

Once a court has decided what promises are included in the contract, the court is faced with interpreting the contract. The court will first attempt to determine: Multiple Choice

the parties' principal objective

Mr. Blue gave his favorite nephew Jim Jr., who is a mechanic, $1,000 in January. Later that year, he needed his car repaired. In the sales contract, Mr. Blue indicated that the amount owed should be deducted from the money already paid. A court will find that Mr. Blue failed to give proper consideration for the contract.

true

Reggie went to the Napa Valley Harvest Festival, when he stopped at Tracy's booth where she was selling paintings of vineyards. Reggie admired a painting of vineyards, which did not appear to be for sale. Reggie said to Tracy, "I will give you $200 if you give me that painting right now." Tracy said nothing in response, but she gave Reggie the painting, and Reggie gave her $200 in cash. This is an example of a contract that is now:

unilateral and executed

In Kolodziej v. Mason, the case in the text, the court held that Mason's Dateline statement:

was not an offer because he did not have the intent to create an offer.

Al hires Bob to move his furniture to his new house. On the day of the move, Bob does not feel like moving furniture, so he asks his friend Chuck to move the furniture. Chuck decides to leave before completing the move in order to watch a football game on TV. Al has to delay his move and hire another mover at a higher price. Al wants to sue Bob to recover for his damages. Given these facts, Al will most likely:

win, because Bob is liable to Al.